Plans are taking shape to pipe carbon-heavy Canadian oil to the Northeast, pushing into gear an effort to size up CO2 costs of fuels used in the region.

As concerns rise over plans to pipe Canadian tar sands oil to the East Coast for the first time, a dormant effort to clean up the region's fuels is showing new signs of life.

The Northeast States for Coordinated Air Use Management[2] (NESCAUM) has accelerated a project to crunch the full "life cycle" carbon emissions of vehicle fuels used in the region—from their extraction through to their refining, transportation and combustion.

With the fuel tracker, NESCAUM hopes to advance a clearer picture of the transport sector's sizable—and growing—contribution to regional greenhouse gas emissions.

The new data, expected to be released later this year, could be the underpinning of a climate policy several years in the works called the Clean Fuels Standard.

In 2009, NESCAUM, a nonprofit association of air quality agencies, began working with 11 states on the fuel standard, which could change the Northeast's transportation systems by requiring oil refiners and distributors to lower the amount of carbon in their fuels by up to 15 percent over 15 years. The program was to resemble the landmark low-carbon fuel regulations in place in California.

But last year, the states shelved formal work on the policy indefinitely due to a mix of political, economic and legal factors.

Now, a sense of urgency is once again building for action as industry plans several pipeline projects that could open a gateway for carbon-heavy oil sands to travel from western Canada to Eastern states.

Matt Solomon, transportation program manager for NESCAUM, said work on the fuel tracker kicked into gear last month, largely because of the "strong likelihood" that the region's fuel mix would soon get dirtier.

Currently, most of the petroleum that flows to the East Coast is light or medium crude oil; 11 percent is heavy oil mainly from Brazil, Cameroon and Venezuela.

About half of the total arrives as crude oil or refined products by ocean tanker, barge or railroad from more than a dozen countries and Midwest states. The rest is refined on the Gulf Coast and is transported mostly through a 5,500-mile pipeline that runs from Houston, Texas, to northern New Jersey, owned by Colonial Pipeline Company[3].

Solomon and others flagged three main pipeline proposals as potentially disruptive to the Northeast's fuel footprint:

►The Keystone XL pipeline. If approved by the Obama administration, the proposed 1,700–mile Keystone XL would transport oil from tar sands mines in Alberta to Texas for refining. Once refined, some of the Canadian heavy oil could reach the East Coast via the existing Texas-to-New Jersey pipeline. Colonial Pipeline spokesperson Steve Baker confirmed that possibility, but could not say whether plans have been made.

►TransCanada's East Coast route. TransCanada Corp., the Keystone XL's Canadian builder, could also supply tar sands oil to the Atlantic Coast by converting part of its cross-Canada natural gas pipeline to oil and expanding the line. The pipeline could link to the Irving Oil Corp. refinery in Saint John, New Brunswick, which currently supplies fuels to New England. "It's not a Plan B, it's a Plan A, and it will go if the market supports it," Russ Girling, the firm's CEO, told Bloomberg this month[4].

►Enbridge Line 9 reversal. Enbridge Inc., Canada's biggest pipeline operator, will begin to reverse the flow of its Line 9 pipeline[5] this spring in order to move heavy Canadian crude further east—from Ontario to refineries in Toronto, and eventually to Montreal. Line 9 could potentially connect to another cross-border pipeline that, if reversed, would send tar sands oil from Montreal into Maine. The owner of that line, Portland Montreal Pipe Line Corp.[6], has previously expressed interest in switching the flow to move Canada's oil to New England.

Oil Sands Among the Most Polluting

Calculating the full life cycle of emissions for each fuel is a crucial but "nightmarish accounting exercise," Solomon said.

California's Low-Carbon Fuel Standard[7] uses a similar life cycle analysis to determine carbon intensity scores for 250 types of crude—about 60 of which are high carbon—plus alternatives like liquid biofuels, natural gas and electric cars.

The scheme, the first of its kind in the world, went into effect last year and requires the state's fuel mix to be 10 percent less carbon-intensive by 2020. Oil producers, importers and fuel blenders that exceed carbon intensity limits must reduce their scores by buying tradable credits or investing in cleaner alternatives.

The program ranks oil from the tar sands as among the most polluting of all fuels, with values of 106 to 111 grams of CO2 equivalent per mega joule, depending on where and how they're produced. Light crudes from Saudi Arabia, by comparison, score just under 94 grams, according to the California Air Resources Board[8], which enforces the mandate.

NESCAUM expects to complete the initial phase of its fuel calculator this year. It will continually update the tool as new or more accurate data become available, Solomon said.

Tailpipe emissions account for as much as 40 percent of greenhouse gases in the Northeast, making fuel policy crucial to efforts to tackle global warming.

"It's hard to understate how important a transportation fuel policy is for the region," said Jeremy McDiarmid, the Massachusetts director of Environment Northeast[9], an advocacy group.

Clean Fuels Standard Dead, for Now

Justin Johnson, deputy secretary of the Vermont Agency of Natural Resources[10], said progress on the Clean Fuels Standard slowed to a halt last year as leaders struggled to reach consensus on what the program should look like.

"There are no formal plans to move forward at this point," Johnson said in an interview.

Vermont and other states wanted a legally binding rule like California's standard. But governors and legislators in Maine, New Jersey and New Hampshire rejected the idea of a mandatory policy. New Jersey officially opted out.

Johnson gave several reasons for the declining interest, including concerns that legal problems surrounding California's program could undermine its own efforts, fierce opposition from oil industry groups and rising political conservatism in the region.

More practically, the same state officials working with NESCAUM on the fuel standard work together on the Regional Greenhouse Gas Initiative, which recently underwent an aggressive and comprehensive review[11].

Several states are concerned, Johnson said, because "if you raise the carbon intensity of the fuel you're using, it makes the goal of lowering the carbon intensity overall that much harder to achieve. It's going in the wrong direction."

Frank Litz, executive director of Pace Law School's Energy and Climate Center[12], said his center plans to work with the Northeast states to study the economic and technical aspects of the Clean Fuels Standard and "build constituencies to get it over the finish line."

That way, proponents can "pounce when the moment is right," he told a group of state environmental officials and advocates at a Pace workshop this month, where the tracking system was discussed for one of the first times publicly.

The regional low-carbon fuel standard could become a target for the resurgent climate movement, said David Stember, who coordinates the Tar Sands Free Northeast campaign[13] for 350.org, a climate advocacy organization.

Corey Lewandowski, director of the New Hampshire chapter of Americans for Prosperity[15] (AFP), said his group will continue to meet with individuals and groups to explain the "detrimental" economic impact of a fuel standard, so they "can be prepared" to fight against any future attempts by state officials to pursue the policy.

AFP, which is financed partly by the Koch brothers and other oil industry interests, has been one of the loudest critics of the fuel policy, along with the Consumer Energy Alliance. Both groups argue the scheme would raise gasoline prices and harm businesses and economic recovery.

"As people continue to struggle in this economy, the last thing we need to do is burden them with more rules and regulations," Lewandowski said.